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Question 23 (4 points) Suppose you borrowed $35000 at a rate of 11 percent and must repay it in equal installments at the end
Question 24 (4 points) Consider the following stream of cash: Year Cash Flow a uewn 1000 1000 1000 4000 -4000 If your opportu
Question 25 (4 points) You just purchased a parcel of land for $90000. If you expect to earn a 14 percent annual rate of retu
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Answer #1

23). Interest paid in 1st year = Outstanding loan amount at start of the period * Interest Rate

= $35,000 * 0.11 = $3,850

24). PV = =1 [CF(i) / (1 + r)i]

= [1 / (1 + 0.09)] + [1000 / (1 + 0.09)2] + [1000 / (1 + 0.09)3] + [1000 / (1 + 0.09)4] + [4000 / (1 + 0.09)5] + [4000 / (1 + 0.09)6]

= 0.92 + 841.68 + 772.18 + 708.43 + 2,599.73 - 2,385.07 = 2,537.86

25). FV = PV * (1 + r)n

= $90,000 * (1 + 0.14)20

= $90,000 * 13.7435

= $1,236,914.09

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